Triton Pacific Investment Corporation Inc., a publicly registered non-traded business development company, and Pathway Capital Opportunity Fund Inc., a closed-end interval fund managed by Prospect Capital Management, plan to merge and create a non-traded BDC called TP Flexible Income Fund Inc.
The boards of both companies have approved the transaction, which is expected to close in the fourth quarter of 2018, subject to shareholder approval and other customary closing conditions. If approved, the fund will be externally managed by Prospect Flexible Income Management, which is jointly owned by Prospect Capital and Triton Pacific.
Pathway Capital Opportunity Fund was previously a closed-end fund named Pathway Energy Infrastructure Fund Inc. that restructured as an interval fund and expanded its investment focus to include infrastructure and infrastructure-related companies. The fund launched in September 2014 and has raised approximately $9.4 million in investor equity, as of June 2018.
Triton Pacific Investment Corporation, which focuses on both private equity and debt related investments, launched in March 2013 and has raised approximately $22.6 million, as of June 2018.
Under the terms of the merger agreement, Pathway shareholders will receive a number of Triton shares with a net asset value equal to the net asset value of the Pathway shares they hold, as determined shortly before closing.
“The proposed merger is expected to provide a range of near-term and long-term benefits focused on driving shareholder returns through improved scale, an ability to leverage fixed costs, access to financing, and enhanced portfolio diversification,” the companies said in a statement.
The fund’s investments are expected to consist primarily of syndicated senior secured first lien loans, syndicated senior secured second lien loans, and to a lesser extent, subordinated debt. Additionally, up to 30 percent of its investments are expected to consist of other securities, including private equity (both common and preferred), dividend-paying equity, royalties, and the equity and junior debt tranches of pools of broadly syndicated loans known as collateralized loan obligations.
Triton Pacific Securities will continue to act as the dealer manager for the registered offering of the fund’s common shares upon consummation of the transaction.
Prospect Capital Management is an SEC-registered investment adviser that invests in and manages high-yielding debt and equity investments using both private partnerships and publicly traded closed-end structures. The company has $6.2 billion of assets under management as of March 31, 2018.
Triton Pacific Capital Partners is a private equity firm that has sponsored 50+ private equity partnerships totaling $1 billion in assets and offerings.